Check Out These Pages

Check Out These Pages

• www.nacha.org

• www.federalreserve.gov

• www.afponline.org

The U.S. Financial Environment

Reference:ECM Chapter 3

Financial Markets

• Money Markets & Capital Markets

• Security Exchanges & Markets

• Primary Markets & Secondary Markets

Financial Institutions

• Commercial Banks• Investment Banks and Brokerage Firm • Thrift Institutions• Credit Unions• Mutual Funds• Factors• Insurance Companies• Consumer Credit Companies

Commercial Bank Services

• Intermediation Services

• Payment and Collections

• Guarantor Services

• Agent or Fiduciary Services

• Consulting Services

• Risk Management Services

• Broker/Dealer Services

Intermediation Services

• Deposit Products

Demand Deposit Accounts (DDA)

Time Deposit Accounts

Other Interest Bearing Accounts• Credit Services

Short-term Loans

Long-term Loans

Leasing

Mortgages

Intermediation Services(continued)

• Investment Banking

Commercial Paper (CP)

Loan Sales

Private Placement

Corporate Bonds and Equity

Guarantor Services

• Letters of Credit

• Standby L/Cs

• Credit Enhancement Standby L/Cs

• L/Cs Confirmations

Agent or Fiduciary Services

• Trustee Services

• Investment Management

• Corporate Pension Plans

• Qualified Employees Benefit Plans

• Corporate Trustee

• Transfer and Paying Agent

• Registrar

• Custody Services

Investment Banking and Brokerage Firms Services

• Bond and Stock Underwriting

• CP Dealers and Underwriters

• Institutional and Retail Brokerage

• Investment Advisory and Portfolio Management

• Risk Management

• Insurance Services

Regulatory Environment

• Federal Level

• State Level

Federal Regulatory Agencies

• Federal Reserve

• Federal Deposit Insurance Corporation (FDIC)

• Office of the Comptroller of the Currency (OCC)

• Securities and Exchange Commission (SEC)

• Department of Justice

Federal Reserve: Roles

• Bank supervision

• Monetary policy

• Banking services

• Fiscal Agent

Federal Reserve Supervision

• Member commercial banks

• Bank holding companies

• Edge Act banks

• U.S. banking activities of foreign banks

• Foreign activities of U.S. member banks

Federal Reserve: Monetary Policy

• Reserve Requirements

• Discount Window Rate

• Open Market Operations

Federal Reserve:Banking Services

• Check clearing

• Wire transfer through Fedwire

• Automated Clearing House System (ACH)

Federal Reserve: Fiscal Agent

• Banker for the federal government.

• Accepts payment for federal taxes on behalf of the IRS.

• Fiscal agent for the Treasury when issuing, redeeming, and transferring ownership of government securities.

Federal Reserve: Organization

• Board of Governors

• Advisory Committees

• Federal Open Market Committee (FOMC)

• Federal District Banks

FDIC: Roles

• Supervisor of state-chartered non-member banks

• Insurer

• In charge of bank failure

FDIC: Insurance

• Administers the BAIF and SAIF

• FDICA of 1991 mandates risk-based deposit insurance premiums

SEC: Roles

• Disclosure regulation for public companies, including quarterly and annual report filings.

• Registration of securities to be sold to the public.

Federal Legislation

• Federal Reserve Act (1913)

• Edge Act (1918)

• McFadden Act (1927)

• Glass Steagall Act (1933)

• Electronic Funds Transfer Act (1978)

• Depository Institutions Deregulation and Monetary Control Act (1980)

Financial Legislation

• Garn-St Germain Depository Institutions Act (1982)

• Expedited Funds Availability Act (1988)

• Financial Institutions Reform, Recovery, and Enforcement Act (1989)

• Federal Deposit Insurance Corporation Improvement Act (1991)

• Interstate Banking and Branching Efficiency Act (1994)

Federal Reserve Act1913

• Provided for the formation of FRS and the foundation for the current banking system

• Gave the Fed supervisory powers over member banks

• Member banks subjected to reserve requirements (RR)

• Allowed the Fed to create a payment and collection system through member banks

Edge Act1918

• Permits domestic banks to invest in corporations that engage in international banking and finance.

• Edge Act corporations can operate anywhere in the U.S.

• Edge Act corporations are not subject to state banking laws.

• Edge Act corporations can’t accept domestic deposits and make domestic loans.

McFadden Act1927

• Governs geographical expansion for banks.

• Prohibited branching across state lines unless otherwise allowed by state laws.

• Gave states jurisdiction over bank. Expansion within and across state lines.

• Restrictions apply to state and national banks.

Glass Steagall Act1933

• Established the separation of banking and commerce, including investment banking

• Prohibited commercial banks from underwriting securities other than government securities

• Established deposit rate ceilings on deposit account, including a prohibition against payment of interest on DDA

• Established the FDIC to insure bank deposits up to a stipulated maximum amount

Depository Institutions Deregulation and Monetary

Control Act (DIDMCA)1980

• Imposed RR on all depository institutions regardless of FRS membership status.

• Extended fed services to all deposit-taking institutions.

• Mandated the fed to reduce or price payment system float.

DIDMCA (Continued)

• Mandated the pricing of previously free fed services according to standards of a tax-paying vendor.

• Reduce banking float.

• Allowed interest on consumer checking accounts.

Federal Deposit Insurance Corporation Improvement Act

(FDICA)

• Established higher standards for safety and soundness for financial institutions.

• Requires early closure of banks and thrifts when net worth falls below 2%.

• Requires the establishment of risk-based deposit insurance premiums.

Interstate Banking and Branching and Efficiency Act

1994

• Permits BHCs to acquire banks located in any state after September 1995.

• Allows banks to merge operations with banks in another state so long as states have not opted-out of bill.

• Allows banks to establish new branches provided state laws expressly permit it.

Gramm-Leach-Bliley Act1999

• Eliminated barriers among banking, insurance and securities firms.

• Allowed easier entry by foreign banks.

• Established Federal Reserve as the primary regulator of banks.

• Establishment of privacy policies.